Kalera Public Limited Company

Good morning and welcome to the Calera second quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions via webcast. If you are at your computer, please use the submit a question link in your webcast viewer. Please note, this event is being recorded. I would now like to turn the conference over to Aparna Mehra, Director of Investor Relations. Please go ahead.

Good morning, and thank you for joining us today to discuss Calera's financial results for the second quarter of 2022. This morning, we issued our earnings release, which is available in the Investor Relations section of our website at investors.calera.com. With me on today's call are Jim Layton, President and Chief Executive Officer and Fernando Conejo, Chief Financial Officer. We will begin with some remarks and then take your questions. Before we begin, I would like to remind you that today's comments will include forward-looking statements under federal securities laws. Forward-looking statements are identified by words such as believe, expect, intend, estimate, project, anticipate, will, plan, design, may, should, or other comparable words and phrases. Statements other than statements related to historical facts, such as statements regarding our future results of operation and financial position, our business strategy and plans, and our objectives for future operations are also forward-looking statements. Our actual results or performance may vary materially from those contemplated by such forward-looking statements. A discussion of the risk factors that could cause a material difference in our results compared to these forward-looking statements are contained in our SEC filings, including our report on Form 10-Q. Calera assumes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after today. With that, I will now turn the call over to Jim Layton.

Thank you, Aparna, and good morning, everyone. We appreciate you joining us today on our first earnings call as a publicly traded company in the U.S. in your interest in Calera. Listing on NASDAQ was an important milestone for Calera, but it was only one of many milestones we've marked in the past 24 months, beginning with the launching of our first farm in Orlando. With that farm, we were able to attract many blue chip customers, as you can see on slide four. We've continued to grow the business by expanding our regional footprint into Atlanta, Houston, and Denver. And through acquisitions, we established global operations in the Middle East, South Asia, and Europe. We also acquired Vendara, which gives us an important and unique ability to vertically integrate our business by producing seeds designed specifically for Clara and other indoor farming operations. We also introduced our full range of leafy greens across multiple channels with plans to continue customizing and expanding our product portfolio based on customer and consumer demand. Turning to slide five, another milestone, certainly for me personally, was becoming CEO of Calera in May of this year. The vertical farming industry is expected to grow to $19 billion in five years. And I'm excited by the opportunity to leverage my many years in food and CPG experience at Calera as we provide fresh, clean, local, nutritious greens at price points that are accessible to most everyone. And we're able to do it in a way amazingly that uses 95% less water and 99% less land than traditional farming. As I mentioned, Clara listed on NASDAQ on June 29th, marking the beginning of a new phase of growth for our company as a pure play global vertical farming business with the only national and global footprint. In the second quarter, we formed an important strategic partnership with U.S. Foods. One of the largest food service distributors in the United States is indicated on slide six. Our relationship with U.S. Foods is allowing us to leverage their national footprint, e-commerce capabilities, consumer analytics platform, a network of over 70 distribution centers and over 100 cash and carry stores to accelerate our transformation to a CPG platform in the leafy greens category. Moving to slide seven, we opened our newest location in Denver, Colorado in April, serving both the retail and food service channels. The Denver facility will provide Calera additional production capacity of approximately 2 million pounds per year. Production will include both whole head and loose leaf lettuce, as well as microgreens. This is our first facility to offer microgreens on a mass scale, which gives us the ability to service the food service as well as retail markets in the Denver area. We are excited and honored to have one of our board members, Dr. Sunny Perdue join me at the Denver farm opening. In addition to sitting on our board, Dr. Perdue is the 14th chancellor of the university system of Georgia and served as a secretary of the U S department of agriculture from 2017 to 2021. And he is extremely knowledgeable and passionate about the problems we collectively are trying to solve and the prospects for Calera. Continuing on to slide eight, our sales grew a triple digit pace in the second quarter, reflecting new facilities being brought online. While the growth is off a relatively small base, we're encouraged by the acceptance of Calera products in both retail and food service channels, with more channels to come. Before we get into the financials with Fernando, I want to spend just a few minutes on slide nine, talking about our strategy, our goals, and our priorities. It has become clear to me that for Clara to become the number one CPG company for leafy greens, which is our goal, we needed to adjust our strategy. First, we will improve farm profitability and become cash flow positive. We have started this effort by focusing farm by farm to bring at least one farm to cash flow positive as soon as possible. Importantly, we will reduce our cash burn by allocating capital only to existing projects and customers before opening additional farms. This will accelerate our transition to positive cash flows. However, it will slow our expansion. Profitability is our number one priority. Second, we will focus on customer-centric branded CPG platform by boosting marketing efforts, branding, and product development to increase sales, distribution, velocities, profitability, as well as market share. We will be very selective about our capital spending to increase production capabilities in existing farms and quickly tap into markets that have the potential to significantly increase current volumes and improve our mix. And finally, we will conserve our capital and relocate strategically only where necessary. We will complete the build-out of U.S. farms required under our agreement with U.S. Foods while finishing construction of our Singapore facility, which is our fully automated multi-product farm of the future. We are materially reducing operating expenses to minimize levels at our headquarters in both the U.S. as well as Germany until profitability and cash flow milestones are achieved. This includes temporarily suspending construction of additional farms. While these measures may be difficult in the short term, they are necessary to achieve our long-term goals and maximize shareholder value.